Atari, Inc. was an American video game developer and home computer company founded in 1972 by Nolan Bushnell and Ted Dabney. Atari was a key player in the formation of the video arcade and video game industry.
Based primarily around the Sunnyvale, California, area in the center of Silicon Valley, the company was initially formed to develop arcade games, launching with Pong in 1972. As computer technology matured with low-cost integrated circuits, Atari ventured into the consumer market, first with dedicated home versions of Pong and other arcade successes around 1975, and into programmable consoles using game cartridges with the Atari Video Computer System (Atari VCS or later branded as the Atari 2600) in 1977. To bring the Atari VCS to market, Bushnell sold Atari to Warner Communications in 1976. In 1978, Warner brought in Ray Kassar to help run the company, but over the next few years, gave Kassar more of a leadership role in the company. Bushnell was fired in 1978, with Kassar named CEO in 1979.
From 1978 through 1982, Atari continued to expand at a great pace and was the leading company in the growing video game industry. Its arcade games such as Asteroids helped to usher in a golden age of arcade games from 1979 to 1983, while the arcade conversion of Taito's Space Invaders for the VCS became the console's system seller and killer application. Atari's success brought new console manufacturers to the market including Mattel Electronics and Coleco, as well as the creation of third-party developers such as Activision and Imagic.
Facing new competition heading into 1982, Atari made a number of poor decisions to try to maintain their leadership position. These decisions resulted in overproduction of units and games that did not meet sales expectations and eroded consumer confidence in Atari. Atari had also ventured into the home computer market with their first 8-bit computers, but their products did not fare as well as their competitors'. The once-profitable Atari began a string of quarters of losses throughout 1983, with the company losing more than over 1983. Kassar resigned as CEO in mid-1983 amid mounting losses and was replaced by James J. Morgan who instituted a number of cost-cutting procedures to turn Atari around, including a large number of layoffs. However, Atari's financial hardships had already reverberated through the industry, leading to the 1983 video game crash that devastated the video game market in the United States.
Warner Communications sold the home console and computer division of Atari to Jack Tramiel in July 1984, who then renamed his company Atari Corporation. Atari, Inc. was renamed Atari Games, Inc. after the sale. In 1985, Warner formed a new corporation jointly with Namco, AT Games, Inc., which acquired the coin-operated assets of Atari Games, Inc. AT Games was subsequently renamed Atari Games Corporation. Atari Games, Inc. was then renamed Atari Holdings, Inc. and remained a non-operating subsidiary of Warner Communications and its successor, Time Warner, before being merged back into the parent company in 1992.
Origins
While studying at the University of Utah, electrical engineering student Nolan Bushnell had a part-time job at an amusement arcade, where he became familiar with arcade electro-mechanical games. He watched customers play and helped maintain the machinery, while learning how it worked and developing his understanding of how the game business operates.
In 1968, Bushnell graduated, became an employee of Ampex in San Francisco and worked alongside Ted Dabney. The two found they had shared interests and became friends. Bushnell shared with Dabney his gaming-pizza parlor idea, and had taken him to the computer lab at Stanford Artificial Intelligence Laboratory to see the games on those systems. They jointly developed the concept of using a standalone computer system with a monitor and attaching a coin slot to it to play games on.
To create the game, Bushnell and Dabney decided to start a partnership called Syzygy Engineering, each putting in of their own funds to support it. They had also asked fellow Ampex employee Larry Bryan to participate, and while he had been on board with their ideas, he backed out when asked to contribute financially to starting the company.